Glass, Lewis and Co., LLC (“Glass Lewis”), an independent proxy advisory service, recently modified its methodology to evaluate the alignment between executive pay and company performance for purposes of making say-on-pay voting recommendations. As discussed below, the changes include identifying smaller peer groups, creating a new model for determining pay-for-performance grades, utilizing fewer performance metrics, and measuring compensation with a three-year weighted average. These changes became effective with Glass Lewis’s recommendations for public companies holding annual shareholder meetings on or after July 1, 2012.

• Peer Groups. Under the former methodology, Glass Lewis developed a peer group of approximately 100 peer companies based upon enterprise value, industry sectors and geographic location. Now, they will utilize Equilar’s Market-Based Peer Group. The new peer group will consist of up to 30 companies based upon the target company’s self-disclosed peer group, the peers of the self-disclosed peers (i.e., “peers of peers”), the companies that use the target company as a peer (i.e., “incoming peers”), and the peers disclosed by incoming peers. The composition of the peer group will now be disclosed to the target company. In its Proxy Paper, Glass Lewis will disclose the specific companies that comprise the peer group.

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